29 Aug Regulators all wet on Cadiz project

It has been a long, costly, frustrating road for the Cadiz Water Project — and now the trip has gotten even stranger. The project has already had to navigate burdensome, byzantine regulations at the state and federal levels and a number of legal challenges.

Now it can add a government employee insider trading scandal to the list.

According to a Wall Street Journal exposé, Cadiz Inc. obtained a chain of emails through a Freedom of Information Act that revealed that a U.S. Bureau of Land Management employee provided non-public information to a short-seller, including a one-day advanced notice of a BLM decision that would keep the project from going forward. Cadiz’s stock plummeted 65 percent within a week of the decision.

The scandal comes after the company has already run a gauntlet of regulatory hurdles and lawsuits that have caused years of delays and cost the company well over $20 million.

The project would provide 50,000 acre-feet of water — enough to supply roughly 400,000 people — each year by capturing groundwater on the company’s private property in the Mojave Desert and transporting it via a 43-mile pipeline, which would be buried along the Arizona & California Railroad’s right-of-way. “All of the water pumped by the project will otherwise evaporate and the conservation of this water will cause no adverse environmental impacts,” Cadiz explained in a press release.

Indeed, the company conducted exhaustive environmental studies and put together a 6,000-page Environmental Impact Report to satisfy California Environmental Quality Act requirements and prove that there would be no significant environmental impacts. The Santa Margarita Water District and San Bernardino County both agreed and signed off on the project in 2012, and the project prevailed in eight subsequent lawsuits and settled one other.

In 2011, the Interior Department suddenly reversed a previous ruling from 2009 and disapproved the project’s use of the railroad right-of-way for the pipeline. Then, in October, the BLM rendered its negative ruling. However, since the ruling is not a “final decision,” it cannot be appealed, and Sen. Dianne Feinstein, the only real legislative opponent to the project, has attached riders to every Interior Department appropriations bill since 2008 barring the government from spending money to review the project.

In short, the regulatory and legislative gamesmanship has placed the Cadiz Water Project in a Catch-22 purgatory. Fortunately, a rider to this year’s appropriations bill would override Feinstein’s anti-Cadiz policy. The bill has passed the House and differences with the Senate version will be hashed out next month. Let us hope that the pro-Cadiz version survives so that Californians can gain a significant and stable new water source.

The Cadiz case highlights just how burdensome and irrational state and federal environmental policies have become. “Anywhere but California, this water would have been delivered decades ago,” Cadiz President and CEO Scott Slater told us earlier this year.

Politicians pay a lot of lip service to the need for finding new water sources and storage, particularly during this extended California drought. Now it is time to walk the walk and finally approve the Cadiz Water Project.